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The role of shareholder proposals in corporate governance

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  • Renneboog, Luc
  • Szilagyi, Peter G.

Abstract

This paper examines the corporate governance role of shareholder-initiated proxy proposals. We find that target firms tend to underperform and have generally poor governance structures, with little indication of systematic agenda-seeking by the proposal sponsors. Governance quality also affects the voting outcomes and the announcement period stock price effects, with the latter strongest for first-time submissions and during stock market peaks. Proposal implementation is largely a function of voting success but is affected by managerial entrenchment and rent-seeking. The results imply that shareholder proposals are a useful device of external control, countering arguments that they should be restricted rather than facilitated under the SEC's current regulatory agenda.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Corporate Finance.

Volume (Year): 17 (2011)
Issue (Month): 1 (February)
Pages: 167-188

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Handle: RePEc:eee:corfin:v:17:y:2011:i:1:p:167-188

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Web page: http://www.elsevier.com/locate/jcorpfin

Related research

Keywords: Shareholder activism Shareholder proposals Corporate governance Sample selection;

References

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Citations

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Cited by:
  1. Salim Chahine & Mohamad Zeidan, 2014. "Corporate governance and market performance of parent firms following equity carve-out announcements," Journal of Management and Governance, Springer, vol. 18(2), pages 471-503, May.
  2. Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2011. "Is ethical money financially smart? Nonfinancial attributes and money flows of socially responsible investment funds," Journal of Financial Intermediation, Elsevier, vol. 20(4), pages 562-588, October.
  3. Boylan, Robert & Cebula, Richard & Foley, Maggie & Liu, Xiaowei, 2013. "An Analysis of Omitted Shareholder Proposals," MPRA Paper 56659, University Library of Munich, Germany.
  4. repec:eme:mfipps:v:36:y:2010:i:3:p:456-484 is not listed on IDEAS
  5. Cai, Jay & Garner, Jacqueline L. & Walkling, Ralph A., 2013. "A paper tiger? An empirical analysis of majority voting," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 119-135.
  6. Foley, Maggie & Cebula, Richard & Houmes, Robert, 2014. "Contesting Corporate Control in the U.S.: The Role of Ownership Structure and the Anti-takeover Measure," MPRA Paper 55428, University Library of Munich, Germany.

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